Once December 31st has come and gone, your tax liability for the tax year will be set in stone.
Until then, and especially now that your final tax picture for the year is becoming clearer, year-end tax planning presents a unique last chance to lower your tax bill. This frees up more money for you to fund your real estate and business investments. This is an investment in time well worth considering!
Tax preparation for the March 15th or April 15th return is not considered advance tax planning. It is merely tax compliance as opposed to voluntary tax reduction planning.
Though returns aren’t due until April, they cover a tax year that ends Dec. 31. Some of the best tax-reduction moves really need to be done by mid-November or early December. They often take some advance planning.
Getting a head start could make you a lot happier in April, giving you a bigger refund or a smaller check to write to Uncle Sam. By taking certain steps now, before the year draws to a close, you can reduce the size of your tax bill otherwise due when you file your return next year.
If you do Year-End Tax Planning, you will gain many tax saving and wealth building benefits. You will be able to:
• Audit-Proof your Taxes to keep the dreaded IRS off your back
• Stop unnecessary Employment Taxes!
• Increase your Depreciation Deductions (HUGE Savings with this)
• Avoid Passive Loss Limitations
• Get Net Operating Losses (Cash Straight in your pocket)
• Avoid being a Dealer (this can cost you thousands)
• Sell properties Tax-Free via the 1031 Exchange (Avoid paying Capital Gains)
• Invest with a Self-Directed IRA
• Structure entities the right way (avoid Audits)
• Fully deduct property tax losses against your income.
• Legally transform capital improvements into deductible repairs for HUGE savings.
• Use Seller financing Tax Saving Strategies
• Avoid or reduce Alternative Minimum Tax
But before you get all that tax saving work done, you may need help from a qualified CPA. Unfortunately, there are more ‘bad’ CPAs out there than good ones. Here are some tips on how to spot the difference and find a gem who can become part of your ‘tax-busting’ team.
HOW TO SPOT A BAD CPA
• They charge astronomical fees for bad, COSTLY advice
• Their incompetence will cause you to pay MORE taxes and get in trouble with the IRS
• They think they know it all, when in fact they DON’T!
• They have little or no knowledge about real estate investing
• They can be overly conservative which means YOU can lose out on thousands of tax savings.
• They can make careless, sloppy mistakes – which are sometimes ILLEGAL
WHAT TO LOOK FOR IN AN EXCELLENT CPA
• They are not afraid to use creative, aggressive strategies to save you a TON on your taxes
• They have taken advanced tax courses
• They own real estate and continue to invest regularly.
• They attend real estate conferences and boot camps to stay informed.
• They have written articles, white papers, and reports on tax-saving strategies.
• They have a long-standing reputation for being ethical and knowledgeable.
• They are competent, hungry, energetic, and willing to do what it takes to help you build your wealth legally.
TOP TEN YEAR END TAX PLANNING CHECKLIST
1. If you own a business, do you have an EIN, an operating agreement, and a separate bank account?
2. Have you recorded all the income and expenses related to the business on the business bank account? This is a huge audit item.
3. If you own an investment property that was foreclosed or sold as a short sale, have you considered the impact of the cancellation of debt income on your income taxes? Have you calculated the loss of sale of investment property?
4. If you generated any kind of active real estate income, have you considered restructuring your business to minimize the impact of self-employment taxes?
5. If you have significant real estate education expenses, have you registered a business in order to minimize your audit exposure by deducting these expenses?
6. If you have significant business expenses and already have a registered business, have you considered converting to a partnership to avoid an audit flag?
7. For homes that have been repossessed, do you know the rules on recourse vs. non-recourse debt?
8. Do you understand what your tax filing requirements are for the states where your business is registered such as annual filing, personal property tax returns, etc.?
9. If you own investment property, have you considered doing a cost-segregation study to increase your depreciation expense?
10. If you bought or sold property this year, have you considered the impact of capital gains, adding rehab expenses to the basis of the property, and whether the holding costs (mortgage interest, taxes, and insurance) are deductible?
Do you need help with your Year-End Tax Planning? I am offering an incredible deal for a ‘Do It Yourself’ Tax Planning Software Package that will step you through the process for just $97. Find out how you can save thousands on your taxes and really build your wealth. Get more information at DIYTaxPLanningKit
